Living under the worry of debt can feel paralyzing and almost impossible to escape. According to Debt.org, the average U.S. household carries an average debt of $145,000. With the cost of living rising, U.S. households are spending more on everything from food and transportation to rent and medical care, so it’s easy to see how quickly debt can spiral out of control. Fortunately, there are some steps you can take to help you take back control of your finances. Here’s how to get started.
Make a list of all your debts
You should begin building a strategy based on the breakdown of your total debt. Gather all of your bills, bank, credit card, and loan statements and write down the monthly payment, total balance, interest rate, and term for each debt owed. Visit AnnualCreditReport.com to get your free annual credit report to help you catch any debt you may have forgotten.
Pay more than the minimum balance
Paying more than the minimum balance can help you pay off your debt faster and pay less in interest. For example, if you have $10,000 in credit card debt with a 10.9% interest rate and a $300 minimum payment, it will take you three years and four months to pay off and you’ll end up paying almost $2,000 in interest.
If you allocate just a hundred dollars more to that same debt, you could pay off the debt in two years and five months and save almost $500 in interest in comparison to paying just the minimum.
Refinance or consolidate debt
High-interest rates can be one of the most difficult obstacles when tackling debt. High-interest rates usually mean bigger monthly payments which can then lead to the possibility of defaulting. If you’ve found yourself with credit cards or a car loan with high-interest rates, it might be a good idea to consider looking for a better rate elsewhere. Transferring your debt to a credit card or loan with a lower interest rate can help save you money in the long run.
Tackle small debt using the snowball method
The snowball method states that you make minimum payments on all of your debt except for the smallest of your debt which you’ll apply more than the minimum payment. This will allow you to quickly pay off your debt and “snowball” those payments to the next debt and so forth. Eliminating the smaller debts first will provide some motivation to help keep you going.
From refinancing to debt consolidation, Hughes can help. Visit HughesFCU.org today and explore your options.